Arbitration Agreements Are Not Always the Last Word in Employment Disputes

Many people are aware that when they sign an arbitration agreement, they’re signing away some of their power. Arbitration contracts are used in any number of situations, and are often signed by new employees when they start a job. While some legal experts drone on about the benefits of arbitration to more efficiently settle employment disputes, and provide relief to an overburdened legal system, employees who’ve had legitimate legal claims blocked by arbitration know the process favors powerful employers and corporations.

By signing an arbitration contract, employees agree to settle any potential lawsuits against their employer outside of a court room in a special hearing presided over by a professional arbitrator. Employers typically hire the arbitrator (often a retired judge) who will consider the facts of the case and issue a ruling. In addition to the obvious conflict of interest of an arbitrator working on the company’s dime, the ruling is often final, and the employee doesn’t have the opportunity to appeal the decision. Most employment lawyers who represent workers agree that arbitration favors the company, not the employee.

So, if an employee signs an arbitration agreement, is he or she automatically backed into a corner when a discrimination, harassmentor wage issuearises?  As a case decided by the Court of Appeal of the State of California, Second District demonstrates, the answer is not necessarily. Put simply, your signature on an arbitration agreement isn’t always the final word on the matter.

This article was written to generally discuss the issue of employment arbitration, as well a case in which a car wash employee was allowed to continue with his lawsuit in a court of law despite signing an arbitration agreement. We’ve written about recent arbitration rulings before (this one involving an arbitration decision by the U.S. Supreme Court).

If you have questions about an arbitration agreement you signed for your employer, or some other employment law question, contact our officefor answers.

Busting Arbitration Agreements | Unconscionability PAGA & Waivers

Wage Theft Claim Throws Arbitration Agreement into Question, Court Sides with Worker

Carlos Juarez worked for the Wash Depot beginning in July 2012. His job duties included washing, drying and detailing cars. In December 2016, he filed suit against the company alleging failure to pay earned wages, minimum wages, and overtimecompensation, among other violations.

Wash Depot attempted to compel arbitration based on the company’s employee handbook, which Juarez acknowledged receiving. The handbook featured an agreement that required disputes to be settled in an arbitration setting. The handbook also included a waiver of employee rights under the state’s Private Attorney General Act (PAGA), which stated that Juarez would have no right or authority for any dispute to be heard as a private attorney general action. However, significant differences in the wording of this waiver existed between the English and Spanish versions of the employee manual.

After Juarez filed suit against Wash Depot, the company attempted to have the case removed to arbitration, per the handbook agreement. Juarez resisted, and the court denied the company’s motion. In its ruling, the court stated that the differences between the Spanish and English versions of the handbook were “profound.” The court further relied on a section of California’s Civil Code regarding contracts, which states:

“In cases of uncertainty not removed by the preceding rules, the language of the contract should be interpreted most strongly against the party who caused the uncertainty to exist.”

Wash Depot appealed the ruling to the California Court of Appeals for the Second District, but the higher court also denied the company’s request to compel arbitration. Referring to the differences in Wash Co.’s English and Spanish manuals, the court wrote:

“At best the difference in the severability clauses in the English-language and Spanish-language versions of the handbook is negligent; at worse, it is deceptive.”

We’ve also addressed PAGA waivers in a prior blog post here.

What This Case Can Mean for Workers

You might have signed an arbitration agreement with an employer years ago, or may be faced with signing one now. As the previous section of this article hopefully makes clear, even employers, with their fancy lawyers, can make mistakes.

If you feel your employer has acted unlawfully and is attempting to compel you to settle your claim via arbitration, be sure you discuss your case with a good employment lawyer. If the company made a mistake in drafting its arbitration agreement, this could benefit you.

Arbitration in the Media

In 2015, the New York Timeswrote a series of articles on the ever-increasing number of companies using arbitration to ban class action lawsuits. Entitled, “Beware the Fine Print,” one of the articles mentioned several specific class actions blocked from the courts. These included an executive at Godman Sachs who attempted to sue on behalf of bankers claiming sexual discrimination, as well as African American employees at Taco Bell restaurants who claimed they were denied promotions, and subject to offensive comments. The article further noted:

“By banning class actions, companies have essentially disabled consumer challenges to practices like predatory lending, wage theft and discrimination, court records show.”

Some Contracts Are Unconscionable

Sometimes a court won’t honor an arbitration agreement or other employment contract because the terms of the contract are unconscionable. In legal terms, unconscionability is defined as something that is overly harsh, unduly oppressive or unfairly one-sided in favor of the person with superior bargaining power. The law generally views the concept of unconscionable contracts through two filters: the first, is known as procedural unconscionability, and the second is substantive unconscionability. The term procedural generally refers to the process under which the contract is negotiated, and substantive refers to the actual terms of the contract.

Regarding contract unconscionability, California Civil Code §1670.5 states the following:

“If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”

If you believe an arbitration contract you signed might be unconscionable, now might be the time to contact a qualified employment lawyer to discuss your situation.

Before You Sign, Have A Lawyer Review (if possible)

If an employer hands you a contract to sign, it might be in your best interest to have an employment attorney look the contract over to make sure everything is on the level. If you’re just starting a new job, you might want to know if your future employer is trying to corner you with unconscionable terms.

Likewise, if you work for a company where you’ve already signed an arbitration agreement, and your company is engaged in unlawful behavior such as wage or overtime violations, a good employment lawyer might be able to find any errors in the contract and help you fight for a better settlement in a court of law.

If you have questions about anything discussed on this page or some other area of employment law, schedule a consultation with the office of Branigan Robertson to find out how we can help.

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